By Sam Schechner
Snapchat owner Snap Inc. will make London its international headquarters and start booking overseas revenue in all the countries where it has offices, breaking from other tech firms whose headquarters in smaller European countries help them shift profit and lower their taxes.
Snap, which is gearing up for a public offering that could value the company at as much as $25 billion, said Tuesday that it would immediately start booking all of its international revenue in London, where it already employs 75 people. A spokeswoman added that the company plans to shift soon to collecting revenue from foreign clients in any country where it has a local branch, boosting its potential tax liabilities.
Snap currently has foreign offices in Canada, France, Australia and Ukraine, in addition to the U.K.
The designation of the U.K. as an international headquarters is a vote of confidence in Britain's effort to attract foreign investment after its vote to leave the European Union. Executives at both tech giants and startups had said in the wake of the Brexit vote that they were concerned about their ability to keep hiring EU citizens, but companies including Apple Inc. have since announced London expansion plans. Snap says the size of the U.K. advertising market, and the company's 10 million users in the U.K., drove its decision.
Snap's plan to start collecting revenue from clients locally wherever it has an office is the latest sign of how governments, particularly in the EU, are pressuring technology companies to change their tax structures. Traditionally, many companies funneled much of their EU revenue through smaller countries including Ireland and Luxembourg on their way to tax havens like Bermuda.
The EU has proposed new rules to divide multinationals' profits among EU countries and has made examples of companies like Apple, which it accused of benefiting from a sweetheart tax deal in Ireland worth as much as EUR13 billion ($13.75 billion). Both Apple and Ireland dispute the charges.
As pressure has mounted, some companies have started shifting their practices. In 2015, Amazon.com Inc. began to collect customer revenue from subsidiaries in several EU countries where it does business--instead of collecting it all in Luxembourg. Facebook Inc. followed suit last year for clients in the U.K.
Snap, which doesn't make a profit, isn't likely to be posting a big overseas tax bill for now. Non-U.S. ad revenue totaled just $18.3 million, or 5% of its total, in 2015, according to eMarketer. But that figure is expected to rise to $440 million, or 25% of the total,in 2018, eMarketer says.
Write to Sam Schechner at email@example.com
(END) Dow Jones Newswires
January 10, 2017 08:52 ET (13:52 GMT)
Copyright (c) 2017 Dow Jones & Company, Inc.